Correlation Between Petroleo Brasileiro and CDW

Can any of the company-specific risk be diversified away by investing in both Petroleo Brasileiro and CDW at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Petroleo Brasileiro and CDW into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Petroleo Brasileiro Petrobras and CDW Corporation, you can compare the effects of market volatilities on Petroleo Brasileiro and CDW and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Petroleo Brasileiro with a short position of CDW. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petroleo Brasileiro and CDW.

Diversification Opportunities for Petroleo Brasileiro and CDW

0.39

Correlation Coefficient

Petroleo Brasileiro  CDW

Weak diversification

The 3 months correlation between Petroleo and CDW is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and CDW Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDW Corporation and Petroleo Brasileiro is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Petroleo Brasileiro Petrobras are associated (or correlated) with CDW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDW Corporation has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and CDW go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and CDW

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the CDW. In addition to that, Petroleo Brasileiro is 1.45 times more volatile than CDW Corporation. It trades about -0.24 of its total potential returns per unit of risk. CDW Corporation is currently generating about -0.06 per unit of volatility. If you would invest  17,013  in CDW Corporation on September 23, 2024 and sell it today you would lose (328.00) from holding CDW Corporation or give up 1.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  CDW Corp.

Petroleo Brasileiro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Petroleo Brasileiro Petrobras has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, Petroleo Brasileiro is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

CDW Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CDW Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Petroleo Brasileiro and CDW

The main advantage of trading using opposite Petroleo Brasileiro and CDW positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petroleo Brasileiro position performs unexpectedly, CDW can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in CDW will offset losses from the drop in CDW's long position.

The idea behind Petroleo Brasileiro Petrobras and CDW Corporation pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.